Diversified Energy Company CEO Rusty Hutson Jr. recently talked with Proactive about the company’s significant achievements in the first half of 2024. He highlighted the successful completion of the $410 million Oaktree acquisition and the $106 million Crescent Pass acquisition, both of which bolster Diversified's portfolio. Hutson praised the company’s employees for maintaining a flat production profile over the last three quarters, contributing to an impressive $121 million in free cash flow and $280 million in EBITDA.
Rusty Hutson Jr.: We had a great first half of the year. I gave a lot of shoutouts to our employees who are working so hard in the field and helping to maintain a flat production profile now for the last three quarters, which is a superb achievement. We also had a big first half of the year with the announcement and closing of the Oaktree acquisition, which was a big acquisition for us for $410 million. And then, the announcement and subsequent closing yesterday of our smaller acquisition of Crescent Pass.
Proactive: Tell us more about Crescent Pass, refresh us on what this brings to the company.
Rusty Hutson Jr.: I would call it a bolt-on. It’s in our East Texas operating area where we have gas exposure to the Gulf Coast LNG export facilities. It's a $106 million transaction, hitting our PB values for valuation of what we deemed necessary to be successful—PB20 on our PDP, only paid for, with no upside whatsoever. It’s a 3.8 times multiple, which is under our equity trading multiple. It brings about 38 million cubic feet per day of natural gas production on that Gulf Coast, contributing about $26 million in the next 12 months of cash flow.
Proactive: Take us through the integration process of Crescent into the company then.
Rusty Hutson Jr.: It’ll have a lot of synergies. It obviously sits right in our existing operating area, which means we’ll be able to find efficiencies within the workforce, probably some pipeline consolidations, and compressor reductions. It’s just a perfect bolt-on for us, allowing us to buy an asset at a good price and improve its economics on an ongoing basis through our Smarter Asset Management program.
Proactive: Going back to the results themselves, take us through some of the financial highlights of the first six months.
Rusty Hutson Jr.: We had a highly successful first half. We measure ourselves off cash flow, and we had $121 million of free cash flow in those first six months, which is superb. We reported $280 million in EBITDA, maintained a flat production profile for the last three quarters, and sustained 50% cash margins, which we pride ourselves on maintaining for the last seven years. We also highlighted that since our IPO in 2017, we’ve returned over $850 million of capital back to our shareholders through dividends and share repurchases, which is an astounding number.
Proactive: And of course, you've declared your latest dividend while at the same time reducing debts, haven’t you?
Rusty Hutson Jr.: Yes, we announced a $0.29 dividend, equivalent to the one we announced in the first quarter. We consider it to be a sacred and sustainable dividend for the foreseeable future.
Proactive: How about some of the other milestones you reached over the six months? Things like being included in the U.S. Russell 2000 index, which must be a feather in your cap.
Rusty Hutson Jr.: Yes, we listed in the U.S. back in December of last year. It was a big move for us as we transition to more U.S. shareholders over the long haul. The Russell 2000 inclusion was a big step for us. We now have access to the U.S. capital markets to a much higher degree than we did prior to this, with just the UK listing.
Proactive: What does the current six months look like, Rusty?
Rusty Hutson Jr.: We’ll continue to focus heavily on our four capital allocation pillars. We’ll continue to reduce leverage, with our dividends set for the foreseeable future. We’ll continue to buy back shares on an opportunistic basis and grow the business. We have some opportunities on the horizon that I think could materialize as we move forward.